Standing Committee B

[Mr. Nigel Beard in the Chair]

Enterprise Bill

Ordered, 
That the Order of the Committee [16th April] relating to programming, as amended [1 May] be amended as follows:—
for paragraphs (6) and (7) there is substituted—
(6) the proceedings on Clause 239, Schedules 16 and 17, Clauses 240 and 241, Schedule 18, Clauses 242 to 245, Schedule 19, Clause 246, Schedules 20 and 21, Clauses 247 to 252, Schedule 22, Clauses 253 to 257, Schedule 23, Clauses 258 to 264, Schedule 24, Clauses 265 and 266, Schedules 25 and 26, Clauses 267 to 269, New Clauses, New Schedules and remaining proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 5 pm on Thursday 16th May.—[Mr. Pearson.]
 Schedule 19, as amended, agreed to. 
 Clause 246 ordered to stand part of the Bill.

Schedule 20 - Schedule 4A to Insolvency Act 1986

Mark Field: I beg to move amendment No. 431, in page 286, line 13, after 'knew', insert
'or ought to have known'.

Nigel Beard: With this we may take amendment No. 450, in
 page 286, line 13, after 'debts', insert 
'or ought to have concluded that he was unable to pay his debts'.

Mark Field: Schedule 20 refers to elements of section 246. Our concern is that there should be not merely a subjective, but an objective reasonableness test. That would tie in with the fairly well known wrongful trading provisions of section 214 of the Insolvency Act 1986. There should be some parallel between those provisions, which have an important part to play and form the basis of the post-discharge restrictions, and the schedule. If the current wording is maintained, there is a risk that a person who is bankrupt will be simply able to deny that he knew that he was unable to pay his debts, and if he could show that he was reasonable to hold that belief at the time, there would be no objective test of whether it was reasonable for him to do so.
 I should be interested to know why the form of wording in the schedule was used, because there seem to be parallels between the sorts of test that should apply to post-discharge restrictions and those in the current legislation relating to wrongful trading. Is there any reason why there should be less of a burden on a bankrupt in that regard? I shall allow the Under-Secretary to have her say.

Melanie Johnson: My say will be brief, but I can help the hon. Gentleman. The amendments do not work well together as a pair. However, the sentiments behind each one are valid. I
 ask the hon. Gentleman to withdraw the amendment because I accept that his points are well made and I am happy to reconsider the matter to see whether we should table an appropriate amendment to give effect to his suggestion.

Mark Field: On that basis, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Mark Field: I beg to move amendment No. 522, in page 286, line 28, leave out from 'also' to end of line 29 and insert
'in particular, consider whether the bankrupt had a bankruptcy order made against him at some time during the period of six years ending'.
 The amendment is a relatively minor one. It would catch not only undischarged bankrupts but those against whom bankruptcy orders had been made, thereby introducing a stricter test. Will the Under-Secretary give us some guidance on the Government's position? They may be using a more certain test, but it does not provide the protection that we would want in the schedule.

Melanie Johnson: I cannot help the hon. Gentleman to any great degree, as the amendment would require that the earlier bankruptcy must have commenced some time in the six-year period for the court to be able to take it into account. That would mean that unco-operative bankrupts could not have their earlier bankruptcy considered, as the order would have been made some time outside the six-year period, probably as a result of their unco-operative activity.
 The amendment is undesirable. We want to reduce the stigma for bankrupts, including those who may have failed before, as long as there is not misconduct. However, the period in question should apply to all undischarged bankrupts and not restrict the measure to those made bankrupt during the period in question. Under the new provision, those who were previously bankrupt could have the earlier bankruptcy considered in bankruptcy restrictions order proceedings, when the previous bankruptcy was within seven years. If the discharge was suspended, that time could be longer. 
 It is right to include those who have not co-operated with the official receiver, but the amendment would rule them out of consideration if the bankruptcy order fell outside the six-year period. That is why we are resisting the amendment.

Mark Field: That is not the intention of the amendment. The Under-Secretary gave the example of an unco-operative bankrupt, but the order would be ongoing and would be caught within the six-year timetable, even if the individual did not co-operate. On the basis that the amendment does not seem to have scintillated the rest of the Committee enough to persuade hon. Members to join the debate, I shall not try to continue our discussion. I hope that we have made our point and we may return to the issue at a later stage. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Mark Field: I beg to move amendment No. 560, in page 287, leave out lines 11 to 14 and insert—
'5 (1) This paragraph applies to any person who—
(a) is an undischarged bankrupt who is not subject to a bankruptcy restrictions order, or
(b) is a former bankrupt in respect of whom there is a pending application for a bankruptcy restrictions order.'.

Nigel Beard: With this it will be convenient to discuss the following amendments: No. 561, in page 287, line 17, leave out 'the' and insert 'an'.
 No. 562, in page 287, line 18, leave out 'will' and insert 'would'. 
 No. 563, in page 287, line 26, at end insert— 
'( ) where the order is made by virtue of sub-paragraph (1)(a), if more than twelve months elapses without an application for a bankruptcy order being made,'.

Mark Field: The amendment was suggested by PricewaterhouseCoopers, the accountancy firm. The main point is made in the lead amendment, with the other three amendments running concurrently with it.
 The amendment would allow the official receiver to be in the position to apply for an interim bankruptcy order in circumstances that he considered appropriate, to protect the public interest while he or she completed the investigation necessary to enable the official receiver to decide whether to apply for a bankruptcy order. The idea is that a little more time is effectively bought, and a stronger, slightly easier and more certain test is provided. 
 The matter is technical, and an accountancy body has advised us on it. One of our concerns about the schedule is that there will be insufficient opportunity for the protection of the public interest if, in a complicated bankruptcy, there is no opportunity to apply for an interim order when appropriate. There may be a delay in such a situation, which would result in the public interest not being protected.

Melanie Johnson: The Bill provides that interim bankruptcy restrictions orders can be made only as a consequence of an application for a substantive BRO. The amendments seek to break the consequential link and provide for separate applications for substantive and interim BROs.
 The amendments do not make sense, because paragraph 5(2) of the schedule, which deals with the application for the interim BROs, requires that 
''there are prima facie grounds to suggest that the application for''
 a substantive BRO would be successful, and that 
''it is in the public interest to make''
 that order. If one has to be in a position to establish a prima facie case—and the court is unlikely to grant an interim order otherwise—there is no reason why the application for a substantive BRO cannot be made at the same time. If such an application were not made, one would risk criticism for undue delay. That is why the provisions on the interim BROs are drafted as they are. 
 The purpose of the interim orders is to prevent delays in serious cases between the application for the BRO and the court hearing, during which time the bankrupt is otherwise subject to no restrictions; 
 therefore, the public is not protected if he or she has been discharged from bankruptcy in the meantime. That is why I resist the amendment.

Mark Field: Will the Under-Secretary guide us some more on the nature of the delays? We are all at one, in the sense that we effectively want to cover the vacuum that may occur between the official receiver making the application and a bankruptcy order being granted. We want to ensure full protection in that period. From what she said, I appreciate that a BRO will not be granted unless there is a strong prima facie case. Obviously, that is the basis on which an interim bankruptcy order would be granted in any event.
 I hope that the Under-Secretary understands our concerns, which we raise on behalf of business interests that are worried that there may be a gap. Will she give us some comfort as to how the process will work and what the likely delays will be? On that basis, does she regard the protection that we are seeking as illusory or unlikely to be necessary in a practical sense?

Melanie Johnson: The point of the interim BRO is precisely to ensure proper protection and that there is no gap, so I share the hon. Gentleman's concern that we need to make that work. That is why the provision is drafted as it is. The gap will arise because arrangements may need to be made before the court hearing. As for applying for an interim order, it would not be good to go to court to argue for an interim BRO without a prima facie case. But, as we have made provision for in the Bill, if a prima facie case can be made, it would be perfectly reasonable to go for a substantive BRO.

Mark Field: On balance, although the matter has been discussed, our underlying concern is that, in complicated cases, the official receiver may find it difficult to bring together enough evidence to satisfy the court that a prima facie case could be made for a fully fledged order. We were seeking guidance on whether an interim order could be made in those circumstances. I appreciate that the Government have no desire for interim orders to be handed out as if they were a rubber stamp job; particularly if, further down the line, there was insufficient evidence to mount a prima facie case and the interim order lapsed before a fully fledged order had been applied for, let alone made.
 I hope that the Under-Secretary understands at least some of the concerns that have been passed on to us about the fact that strongish cases might sometimes be brought. On balance, however, we have made the point.

Melanie Johnson: Before the hon. Gentleman concludes, it may help if I say that I will write to him in a little more detail about timing, with copies sent to other members of the Committee. I assure him that our desire, like his, is that there should be no gap.

Mark Field: That would be helpful, and I thank the Under-Secretary. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Schedule 20 agreed to. 
 Schedule 21 agreed to.

Clause 247 - Investigation by official receiver

Nigel Waterson: I beg to move amendment No. 432, in page 172, leave out lines 37 and 38.
 The amendment is, in effect, sponsored by the CBI and the Consumer Credit Association, which makes me wonder whether it should not have considerable appeal. The amendment seeks to remove subsection (2) of proposed new section 289 of the Insolvency Act 1986. The provisions of clause 247 seem rather odd. Subsection (1) imposes a duty on the official receiver to conduct an inquiry or investigation into the affairs of each and every bankrupt and make a report. In a contradictory provision, subsection (2) says that the official receiver can decide for himself that it is not necessary to comply with the duty set out in subjection (1). 
 We do not agree with that provision; nor do the CBI and the Consumer Credit Association. We all take the view that bankruptcy is a serious and important matter and that a proper investigation—whether it is long or short is another matter—should be made into each case of personal insolvency. If an argument can be made for dispensing with that investigation, at the very least provision should be made for someone else to make that decision. It seems a bit unfortunate, to put it mildly, that the official receiver will be able to decide whether to carry out an investigation. The CBI states: 
''To leave the provision as it stands invites the most self-serving abuse by an overstretched Official Receiver's department.''
 The official receiver's department is already under great pressure. We have said that there will be a sharp increase in the number of insolvencies across the board, and I do not think that has been gainsaid by the Under-Secretary. If it has been I must have missed it. If, like all departments, the official receiver's department will be under relentless pressure to perform to certain standards, will there not be a temptation to cut corners and to take the view that, in many insolvency cases—particularly those involving small amounts—no fraud investigation is necessary? As the CBI says, 
''If the Official Receiver is both judge and jury on the issue whether an investigation is necessary, how will we ever know whether the decision has been made properly?''
 The effect of our amendment would be to require the official receiver to investigate the conduct and affairs of all bankrupts, on the basis that those who have such a duty placed upon them should not have a completely unfettered, unqualified power to release themselves from that very duty.

Melanie Johnson: As the hon. Member for Eastbourne (Mr. Waterson) said, the amendment demands a full investigation by the official receiver into all cases, regardless of the facts and circumstances of the case. There is no such requirement under existing legislation. In summary bankruptcies where the unsecured liabilities are less than £20,000, which account for a large number of bankruptcies, the
 official receiver presently has discretion to investigate where he or she sees fit; I emphasise the word ''discretion''.
 The Bill will remove the provisions relating to summary bankruptcy and introduce instead a general discretion to investigate. It makes for a more efficient use of resources to examine each case on its merits rather than to apply an arbitrary financial limit, as is currently the case. Indeed, the amendment would provide for many a much harsher regime than the Bill envisages. I would like to reassure the hon. Gentleman that, as is currently the case, the official receiver will continue to examine comments and requests from creditors.

Tony McWalter: Does my hon. Friend have in mind the kind of case in which a company is brought down because somebody with whom it has traded for many years suddenly lets it down on a huge order, as a result of which it suddenly finds itself insolvent, when previously it had always been solvent? As I have such a case in my constituency, I would be grateful if my hon. Friend were to resist the amendment.

Melanie Johnson: My hon. Friend raises a very interesting case, on the particulars of which I obviously cannot comment. However, there is no point in placing on the official receiver a duty to investigate under circumstances of the kind that he has just described with reference to his constituency issue, where there would be little to investigate. Such investigation would be intrusive and would cost money and time for all parties concerned.
 Should the official receiver decide that an investigation is necessary and decide to exercise their powers under new section 279(2) to file a notice of discharge earlier than the one-year discharge period, we propose to ensure, in the insolvency rules, that the official receiver notifies the creditors before such a notice is filed before the court. That will allow the creditors to make any representations about matters that they consider the official receiver ought to investigate. 
 I see only disadvantages to the amendment. It is not necessary and it would not smooth things; if anything, it would create a lot of red tape and a lot of activity to no good purpose. I hope, therefore, that I have persuaded the hon. Gentleman to withdraw it.

Nigel Waterson: I have not been persuaded on the merits. There is still the issue, apart from anything else that the Under-Secretary said, of whether the official receiver should be the person to decide whether the official receiver should carry out the investigation. However, so that we can make progress, I am happy to beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 247 ordered to stand part of the Bill.

Clause 248 - Income payments order

Nigel Waterson: I beg to move amendment No. 555, in page 173, line 17, leave out 'before the discharge of the bankrupt' and insert
'within twelve months of the bankruptcy order'.

Nigel Beard: With this it will be convenient to take amendment No. 433, in page 173, leave out lines 19 to 23 and insert—
'(6) An income payments order must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.

Nigel Waterson: To an extent, these amendments overlap slightly. They try to sort out the same problem as we perceive it and as it is perceived by some practitioners in this part of the law. As the Bill stands, it will be possible for bankrupts to be discharged as soon as the official receiver has decided that there is nothing calling for an investigation. In theory, that can happen quite quickly; within weeks or, certainly, two or three months. That means that the trustee will have little time in which to decide whether or not to apply for an income payments order, which gives the trustee an incentive to apply for such an order as soon as possible and gives the bankrupt an incentive to conceal his income from his trustee for as long as possible. If the amendment is accepted, it will put trustees and bankrupts on an equal footing and will stop possible variations between different official receivers' officers around the country.
 Our justification for amendment No. 433 is that there should be no limit on the length of time for which an income payments order or an agreement can last. The decision about whether to cap the length of time should be left to the discretion of the court. Only the court will be in a position to give due consideration to an individual's circumstances and his ability to make future payments. The point is to ensure that debtors who can pay, do pay, and that they are not able to avoid their obligations. Both of the amendments are designed to ensure that, in the scramble to allow someone to come out of bankruptcy within less than the stipulated period of 12 months, creditors are protected and—as far as possible—assets are made available for them.

Melanie Johnson: First, I shall address amendment No. 555. The administration of a bankruptcy case by the official receiver will enable IPOs to be dealt with at an early stage. In cases in which such information has not been made available, it is possible to suspend discharge until it has been delivered. The provisions introducing income payments agreements will speed up the process still further by avoiding court application. There is no real advantage in extending the time available for an IPO application, except in cases in which it is strictly necessary. That is already achieved by means of the facility to suspend discharge. Indeed, the amendment would affect those cases in which a bankrupt had been suspended from discharge. If, after 12 months, he co-operated, the trustee would be time-barred from making such an application. That does not seem to be a sensible consequence.
 Turning to amendment No. 433, I agree that those bankrupts who are able to make contributions from their income should be required to do so. However, setting a 3-year limit to the duration of IPOs recognises that there must be a balance between the 
 benefits that that would bring to the bankrupt's creditors and the rehabilitation of the individual. It would not be fair or consistent to impose a far more stringent system than already exists, as would be the effect of the amendment. I therefore trust that both amendments will be withdrawn.

Nigel Waterson: I am happy to beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 248 ordered to stand part of the Bill.

Clause 249 - Income payments agreement

Nigel Waterson: I beg to move amendment No. 556, in page 173, line 36, leave out 'or'.

Nigel Beard: With this it will be convenient to take the following amendments: No. 435, in page 173, line 38, after 'specified', insert 'part or'.
 No. 557, in page 173, line 39, at end add ', 
 (c) both (a) and (b)'. 
 No. 434, in page 174, leave out lines 9 to 13 and insert— 
'(5) An income payments agreement must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.

Nigel Waterson: We can dispense with these amendments fairly briskly. Amendments Nos. 556, 557 and 435 are technical amendments, which would introduce more flexibility and cover a situation in which a bankrupt had both earned and unearned income.
 Amendment No. 434 echoes our debate on the previous clause, but relates to the duration of the income payments agreement. I simply reiterate what the CBI and others have said: there is no clear reason for the limitation, and it would make more sense to leave the issue to the discretion of the courts, which will quickly establish their practice in the matter while retaining the power to deal more rigorously with exceptional cases. This has nothing to do with entrepreneurialism or enterprise; it is driven by the rule that where a debtor can pay, he should pay. However, given that some of the arguments relating to amendment No. 434 are similar to those that the Under-Secretary contemptuously dismissed in relation to the previous clause, I have little hope that she will accept the amendment.

Melanie Johnson: I am sorry; I am trying to dismiss suggestions gently.
 Amendment No. 556 provides for a situation in which a bankrupt can make payments to his trustee under an income payments agreement both by himself and from a third party at the same time. It is difficult to envisage such a situation arising. Payments are generally made by third parties, such as employers, for example, because a bankrupt has failed, for whatever reason, to make the payments himself, and the trustee goes directly to the employer with an attachment of earnings order to enforce payment. The proposals provide that where an IPA is breached by the 
 bankrupt, the trustee may, under subsection (3), apply to the court for a variation for direct payment by a third party. 
 By removing the word ''or'', as the amendment would, an income payments agreement could provide only for both a bankrupt and a third party to make payments. Individual payment by one or the other would not be possible. I am sure that that is not what was intended. It certainly does not seem necessary or appropriate. 
 Amendment No. 435 would ensure that the same terms are used in referring to the contributions from a bankrupt's income made under an income payments agreement, irrespective of whether they are made direct by the bankrupt or from a third party, such as the bankrupt's employer. Although that might seem sensible at first sight, it would be wrong. Clause 249 introduces new section 310A into the Insolvency Act 1986 relating to income payments agreements. Subsection (1)(a) states that an IPA might provide for a proportion or part of the bankrupt's income to be paid to the trustee or official receiver, whereas subsection (1)(b) provides only that a proportion of the money due to the bankrupt by way of income should be paid to the trustee or official receiver by a third party. The amendment would do away with that distinction. 
 The reason for the distinction is that paragraph (a) deals with the whole of the bankrupt's income, from whatever source, and allows the bankrupt to agree to designate either a proportion of his income or specific part of it, whereas paragraph (b) deals only with money due to the bankrupt from a third party—for example, salary from employment. In that instance, it is sufficient for the agreement to specify a proportion of it. 
 I find it difficult to imagine the situation covered by amendment No. 557, which provides for a situation in which a bankrupt can make payments under an IPA both by himself and from a third party. The amendment is unnecessary because, generally, payments are made by third parties, as I said before. 
 On amendment No. 434, it is right that those bankrupts who are able to make contributions from their income should still be required to do so. I entirely agree with the hon. Member for Eastbourne on that, but setting a three-year limit to the duration of the new income payments agreements reflects both the current and proposed treatment of income payments orders—both the IPA and IPO arrangements. It recognises that there should be a balance between the benefits that that will bring to the bankrupt's creditors and the rehabilitation of the individual concerned. 
 It is also hard to see why anyone who entered an IPA would want to bind themselves for a longer period than could be made under an IPO. That could waste a large amount of court time, which is what IPAs seek to avoid. For those reasons, I invite the hon. Member for Eastbourne to withdraw the amendment. Before I do so, I should like to tackle a further issue that he raised. The term ''income'' covers all forms of income, whether earned or unearned.

Nigel Waterson: I am grateful for that nugget in an otherwise rather dispiriting response from the Under-Secretary. We have achieved something by establishing what income includes, so I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 249 ordered to stand part of the Bill. 
 Clauses 250 and 251 ordered to stand part of the Bill.

Clause 252 - Individual voluntary arrangement

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: I hope that this clause stand part debate will be short, but I have no control over such matters. I am sure that the Under-Secretary will cite the figures—I do not have them to hand, but I remember seeing them—that tell us that there are a relatively small number of individual voluntary arrangements compared with the overall picture of insolvency.

Melanie Johnson: There are 7,000, I believe.

Nigel Waterson: I recall that the numbers have gone down slightly in recent years, but IVAs obviously have carved a niche for themselves in our system. Many people, especially professionals, will strive for an IVA rather than formally enter insolvency proceedings, for the obvious reason that they may be able to continue to practise as, for example, solicitors. People have used IVAs on a fairly widespread basis over several years. In terms of saving court time and professional fees, I am sure that we would all encourage a relatively informal solution whereby a debtor sat down with his creditors and hammered out an agreement on how he would repay them over a period, in whole or in part.
 All the commentators seem to agree—which is a blessing—that IVAs will become significantly less popular because of the Bill. To put it broadly, if someone can go in and out of bankruptcy in a year or possibly much less time, what is the attraction of an IVA? It might be interesting to discuss under a later clause whether IVAs would still be any attraction when professions were involved. The Under-Secretary may be able to help me in an intervention. 
 We are clearly changing the position somewhat for Members of Parliament and others such as justices of the peace, although I read only two days ago in the paper that they are no longer supposed to call themselves that. If not in this debate, I hope that later we can clear up what the attitude of professional bodies such as the Law Society will be. Perhaps they will take a similar view and say that if someone goes into insolvency he will not suffer the risk of being unable to practise his profession unless a bankruptcy restrictions order applies to him. In any event, it is clear that IVAs have fulfilled a purpose in the treatment of people in this country with financial difficulties. However, they do not always achieve what they are supposed to. 
 In the context of the clause and how the Under-Secretary might reconsider it, I want to raise an issue 
 on behalf of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond). He asked me to mention a case in which two of his constituents were put to some trouble and cost when one of the other leaseholders went in for an IVA, which was ran by an insolvency practitioner based at the other end of the country. Many of my hon. Friend's constituents' difficulties were caused—at least indirectly—by the fact that the gentleman in the IVA had failed to declare what amounted to beneficial ownership of his flat in the block. It was difficult to pin down who was speaking on his behalf, but it became apparent in the course of the IVA that the man had not fully declared his assets and, in particular, his beneficial ownership of the flat. 
 The problems generated by that failure provoked correspondence between my hon. Friend and the chief executive—the inspector general and agency chief executive, to give him his full title—of the Insolvency Service. The inspector general confirmed that, although the person nominated to run the IVA must be a licensed insolvency practitioner, he must take only reasonable steps to satisfy himself about the debtor's true position as to assets and liabilities, and ensure that it does not differ in any material respect from that represented to the creditors. 
 We do not believe that IVAs always work splendidly. I have provided just one example of an IVA that was undermined by the very informality of the IVA procedure. What role does the Under-Secretary predict for IVAs? Will they become a thing of the past, and if so, will that be a good thing?

Melanie Johnson: First, I should point out that the concept that those who can pay should pay is a long-established principle of our individual insolvency regime. People in debt already use a variety of procedures to deal with debt, including the formal debt-management plans run by the public and private sector, or more formal, court-based procedures, such as county court administration orders, of which there are about 8,000 a year. However, that regime can be used only when the debtor has total debts of less than £5,000 and a judgment against them.
 The IVA regime set out in the Insolvency Act 1986 has provided about 7,000 IVAs per year. Very few IVAs are entered into after a bankruptcy order has been made, however. A benefit of the post-bankruptcy IVA is that the bankruptcy order can be annulled and the debtor is no longer subject to bankruptcy restrictions. If a person defaults on an IVA, there are grounds to petition again for bankruptcy. 
 We have proposed that the official receiver should be able to act as a nominee and draw up the IVA proposal, which is then put to creditors, and a supervisor who implements and manages the proposal approved by creditors in post-bankruptcy IVA cases. That proposal was first included in ''Bankruptcy—A Fresh Start,'' the Insolvency Service consultation document that was issued in 2000, and last year's White Paper, ''Productivity and Enterprise—Insolvency—A Second Chance'', and was welcomed by both debtors and creditors. 
 Most stakeholders agree that IVAs can lead to a better return to creditors, but debtors and creditors have criticised the level of entry fee and the administration fees charged by supervisors. Allowing the official receiver to act in fairly straightforward post-bankruptcy cases will bring competition into the lower end of the IVA market. The official receiver is well placed to establish whether an IVA would be appropriate for a bankrupt, as he already has details of assets and income through his examination of the bankrupt's affairs. 
 I turn to some of the points that the hon. Member for Eastbourne raised. First, the offence of providing false information will be drawn to the bankrupt's attention before she or he provides information to the official receiver on an IVA proposal. Additionally, if the official receiver has any doubts about the veracity of the bankrupt statement, she or he is likely to decline to act as the nominee for that person. The continuing attraction of IVAs, to which the hon. Gentleman referred, is that the bankruptcy is annulled and not discharged—it is as though it never was. IVAs will continue to be attractive for that reason under the new regime, notwithstanding the hon. Gentleman's points. 
 The intention, though, is not to increase the number of post-bankruptcy IVAs. Only around 0.5 per cent. of IVAs annually are post-bankruptcy. I hope that that clarifies the points for the hon. Gentleman. I commend the clause to the Committee.

Mark Field: A number of friends of mine have been through the IVA treatment and it strikes me that it is one aspect of the Insolvency Act 1986 that has worked quite well. It has been a sensible and pragmatic approach, especially for those who have taken it without going for fully fledged bankruptcy. I reiterate the concern expressed by my hon. Friend the Member for Eastbourne that there is a danger that making bankruptcy relatively more attractive—the exit route being that much swifter—will create a strong disincentive to take the IVA route, which is a sensible one, particularly for individuals with fairly minimal debts. People may have debts totalling a few tens of thousands of pounds, some of which is with the bank and some with individuals or small trading companies.
 My experience in advising a friend who took the IVA route was that he was able to reach a sensible deal that did not involve the large expense or the lengthy process of a fully fledged bankruptcy. However, an individual who might under the current regime be happy to take the IVA route, whereby all the creditors get a certain number of pence in the pound, might feel that, because the time limit for bankruptcy discharge has become more attractive, they should take that route and pay far less. They might do so because they have relatively little in realisable assets, or are unable to cut a deal that involves borrowing money from a friend, for example. That is my only concern. I am not entirely convinced about the provision. The proof of the pudding will be in the eating: whether the take-up of IVAs begins to decrease. Conservative Members have at least had a chance to utter a word of warning.

Nigel Waterson: I would like to come back on a couple of the Under-Secretary's points. What she said was very helpful but it is worth noting in passing that this is yet another new responsibility for the official receiver. I hope that the Committee will take as read the point about resources to which we keep returning.
 There is the further issue of stigma. As I said in the original debate on that point, one of the main attractions of the IVA route is that it does not have the stigma of bankruptcy, and the Under-Secretary has confirmed that. I do not know whether she will be dealing with this later but, given the new arrangements for bankruptcy and bankruptcy restrictions orders, I am curious to know what the professions are going to do about stigma. Will they align their position with that of justices of the peace and Members of Parliament? We may be able to deal with that when we get to the relevant clauses, but I am curious—I could have found out about the issue before this afternoon's sitting, if I had thought about it—as to how that will work. If we analysed figures on those who have taken the IVA route, we would find that a high proportion of them wanted to avoid the stigma of bankruptcy. That probably means that they are professionals of some sort.

Melanie Johnson: We think that the clause adds to the options available. It is about a range of choice for those who are prepared to deal responsibly with their debts. We think that people will continue to pursue the route.
 On the points made about the official receiver's resources, the Insolvency Service has been given substantial additional funding for the next two years. Those extra resources will enable it to be ready to introduce the proposed reforms, which are to invest in its infrastructure, to train staff and to continue to deliver the service that customers expect. 
 The processing of IVAs under the new financial regime will be cost-neutral. The official receiver will act only in straightforward cases, and the fast-track regime will maximise returns. The official receiver will acquire much of the information needed to make decisions on viability of IVAs through examination of the bankrupt's affairs. Official receivers are experienced in assessing bankrupts' disposable income through the operation of a similar regime for income payments orders. 
 I hope that I have reassured the Committee that the resources are in place, with the experience alongside them. 
 Question put and agreed to. 
 Clause 252 ordered to stand part of the Bill.

Schedule 22 - Individual voluntary arrangement

Nigel Waterson: I beg to move amendment No. 451, in page 291, line 21, leave out 'a bankruptcy debt' and insert
'a debt which is a bankruptcy debt or would be a bankruptcy debt if a bankruptcy order were made in relation to the debtor on the day the official receiver considers whether subsection (2) applies'.

Nigel Beard: With this we may take the following amendments: No. 452, in page 291, leave out lines 27 to 32 and insert—
'(b) must include an invitation to creditors to approve the voluntary arrangement in accordance with section 258 and the Rules.'.
 No. 453, in page 291, line 32, at end insert— 
'(4A) When applying to section 258 and the Rules to subsection (4)—
(a) references to section 257 shall be omitted,
(b) subsection (3) of section 258 shall not apply, and
(c) the meeting may approve the proposed voluntary arrangement with modifications but shall not do so unless both the debtor and the official receiver consent to each modification.'.
 No. 436, in page 292, line 1, after 'court', insert 'and the creditors'.

Nigel Waterson: I am indebted again to PricewaterhouseCoopers for the group of amendments. They are designed to approach some practical issues in the schedule, which deals with the nuts and bolts of IVAs under the Bill.
 First, I shall speak to amendment No. 451. I am told that to restrict the definition of creditor to those who were creditors at the date of the bankruptcy could prejudice those who became creditors after the bankruptcy order. Under proposed new section 263A of the Insolvency Act 1986, fast-track IVAs can be proposed at any time before the debtor is discharged, which could be up to 12 months after the bankruptcy order. The amendment brings proposed new section 263B(3)(a) of the 1986 Act into line with the existing provision on IVAs for undischarged bankrupts, which hon. Members will readily recall is section 257(3) of that Act. 
 Amendments Nos. 452 and 453 go together. Some provision must suggest modifications when, for example, creditors are aware of undisclosed assets. Without such a provision, many arrangements may be doomed to fail or end up in the courts. It has been suggested that there should not be a mechanism for the appointment of the supervisor other than the official receiver. To facilitate that, there must be an opportunity for a meeting of creditors on the same basis as for other IVAs. 
 As drafted, proposed new section 263B(4)(b) permits the official receiver to decide his own criteria for judging whether the proposed voluntary arrangement has been accepted. In theory, he could say that the proposal would be accepted if 1 per cent. of the creditors voted in favour, which is obviously nonsense and would be unacceptable. The criteria for the acceptance of a fast-track IVA should be the same as for any other IVA: to ensure consistency with them and between different official receiver officers. If accepted, amendments Nos. 452 and 453 would bring proposed new section 263B into line with provisions related to other IVAs, but with additional protection for the official receiver. 
 Amendment No. 436 would deal with the fact that the Bill does not provide for creditors to be notified of the outcome of a fast-track IVA proposal. They could therefore be aware that such an IVA had been 
 proposed, but not whether it had been approved. That is unacceptable, especially as the creditors will be bound by the IVA if it is approved. The amendment would simply bring the fast-track IVA into line with other IVAs, and would be a sensible and practical improvement to the Bill.

Melanie Johnson: On amendment No. 451, those who are currently eligible to vote are creditors in relation to a bankruptcy debt—those whose claims run up to the date of bankruptcy. The provision does not allow any creditor to claim for a debt or liability, or for a debt or liability arising out of an obligation occurring after the bankruptcy. The amendment would allow creditors of a debt or liability incurred after bankruptcy, or of debts or liabilities arising out of obligations occurring after bankruptcy, up to the date of the official receiver's decision on whether the IVA is likely to be approved, to vote on a proposal for an IVA.
 If debts are incurred, another bankruptcy order can be obtained in respect of them. There must be some cut-off point concerning the administration of the estate, and that is set by the 1986 Act as the date of the bankruptcy order. That approach is taken in all insolvency proceedings, including fast-track, post-bankruptcy IVAs. If debts are incurred after bankruptcy and are unpaid, the proper course of action is for that creditor to present another bankruptcy petition against the bankrupt. 
 One must also bear in mind that the bankruptcy order will be annulled after agreement to the fast-track IVA. Creditors of debts incurred after the bankruptcy order are not creditors in that bankruptcy. Furthermore, the rules on existing IVAs clearly set out two types of IVA case. Rule 5.1 of the Insolvency Rules 1986 sets out that case 1 applies where the debtor is an undischarged bankrupt and case 2 applies where he is not. Rule 5.17 sets out that creditors in case 1 are allowed to vote for amounts that are due up to the date of bankruptcy. It also provides that, in case 2, debts can be calculated up until the date of the creditors' meeting to approve, modify or reject the proposal. 
 That clear delineation between debtors who are undischarged bankrupts and those who are not has worked successfully since the Conservatives introduced IVAs in the 1986 Act. We have no wish to muddy the waters, which we would if we were to accept the amendments. 
 Amendments Nos. 452 and 453 propose the addition of further steps to the new regime for fast-track IVAs. They would require a creditors' meeting to be held to consider a debtor's proposal for an IVA. At the meeting, modifications to the proposal could be suggested, but would not be made unless the debtor and official receiver consented to them. That would add significantly to the costs of the process, as I am sure that the hon. Member for Eastbourne appreciates. It would also negate the purpose of fast-track IVAs, which are intended to provide low-cost arrangements in straightforward cases and make IVAs more accessible in small cases. 
 The fast-track procedure will not work to the disadvantage of creditors. The official receiver is well practised in assessing the level of income that bankrupts are able to pay, and he or she will agree to act only in cases where there is a reasonable level of returns to creditors. Creditors will still be able to reject the IVA if they are not satisfied. Therefore, little purpose would be served by the holding of a meeting. 
 On amendment No. 436, we want to ensure that the result of the creditors' vote on the new fast-track IVA is also reported to the court, for which the Bill already provides. That will trigger the annulment of the bankruptcy in successful cases. However—to answer the point made by the hon. Member for Eastbourne, at least in part—we will prescribe in the insolvency rules for the new fast-track IVAs that creditors must be notified of the results of their votes at the same time as the result is reported to the court. That would reflect current IVA legislation under section 259 of the 1986 Act, whereby persons, other than the court, who are to be notified of the result of a creditors' meeting, are prescribed in rule 5.22. For that reason, I ask the hon. Gentleman to withdraw his amendment.

Nigel Waterson: I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Nigel Waterson: I beg to move amendment No. 454, in page 293, leave out lines 29 to 34. This not a technical amendment, but one of principle. I am, again, indebted to PricewaterhouseCoopers. The proviso in subsection (1) restricts the official receiver to handling fast-track and other IVAs for undischarged bankrupts. Removal of that proviso would enable the official receiver to act as nominee or supervisor in any IVA. That is, in any view, beyond the traditional role of official receivers and it could be argued that it would put them into direct competition with private sector insolvency practitioners. Because official receivers are employees of the Insolvency Service, the service would be competing with those whom it is responsible for regulating. It would therefore have, on the face of it, a conflict of interest. That concerns practitioners and I think that they have a point.

Melanie Johnson: The amendment is to restrict the possibility, as the hon. Gentleman has said, that the new fast-track IVA regime can be extended by order to cases in which the debtor is not an undischarged bankrupt. We have no plans to do that at the moment, but we would want to keep open the possibility of extending fast-track IVAs to other cases, should the scheme prove popular with debtors and creditors. Therefore, we have provided an order-making power to allow the Secretary of State to repeal the proviso that the official receiver can act as nominee or supervisor only in post-bankruptcy IVAs. Any exercise of that power will be subject to affirmative resolution with the full consideration of both this House and the other place.
 The fast-track regime is aimed at generating more monies for creditors and getting more people out of bankruptcy. It will also have a more transparent fee 
 regime than does the current IVA regime. A number of us have received complaints from constituents about the fees charged by some, certainly not all, insolvency practitioners. If the new fast-track regime results in some insolvency practitioners charging lower fees and being more transparent about their costs, I do not see that as bad thing. A little healthy competition is good for consumers, as we have already debated at length when considering earlier parts of the Bill. 
 I am sure that Opposition Members would not want to be branded as people who are protecting insolvency practitioners from an element of competition. I do not accept their argument that there is something unfair about the competition, so I hope that they feel able to withdraw the amendment.

Nigel Waterson: It is a bit unreal for the Under-Secretary to lecture Conservative Committee members about the benefits of competition. We are firmly committed to red-blooded, healthy competition. However, does she not at least consider the possibility that it might reasonably be said that it is unhealthy competition when an arm of Government is competing with private practitioners? She might have a point about their fee structure, with which I do not necessarily disagree, but why should they have to compete with an arm of Government with all the resources that that has at its disposal? I am so alarmed by what she has said that I am even more wedded to the amendment.
 The Under-Secretary has prompted a range of other questions, including, for example, will there be cross-subsidy within the Insolvency Service, in terms of competing, healthily or otherwise, with private insolvency practitioners? She has tweaked the curtain and revealed the true purport of this, which is to have what she calls healthy competition. That raises a lot of serious questions and I suspect that we shall return to the matter on Report, once the insolvency practitioners have had a chance to digest the full implications of what the Under-Secretary has said. However, for the moment I am happy to beg leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Schedule 22 ordered to stand part of the Bill.

Clause 253 - Disqualification from office: justice of the peace

Question proposed, That the clause stand part of the Bill.

Harry Barnes: I want to give the Under-Secretary a chance to explain the clause. It seems that people will no longer be disqualified from becoming justices of the peace for being bankrupt. If so, what is the explanation? The answer might enlighten our debates on following clauses.

Melanie Johnson: We do not want society to lose the benefit of the expertise contributed by people who are justices of the peace merely because they have been made bankrupt. The Lord Chancellor already has in place a system of local advisory committees through which the conduct of JPs can be investigated. The
 advisory committees allow the Lord Chancellor to operate a discretionary regime in respect of misconduct by JPs. That mechanism can also encompass those who become bankrupt. Perhaps, Mr. Beard, I should declare an interest as I was a JP, and I am still on the supplemental list.
 The current automatic bankruptcy restriction imposed by the Justices of the Peace Act 1997 is, in our view, both unnecessary and somewhat heavy-handed. We recognise that certain bankrupts will not be suitable persons to act as JPs. The making of bankruptcy restrictions orders against JPs would be a clear indication that the conduct of their financial affairs had been found to be wanting and, depending on the circumstances, would be likely to lead to their removal. Equally, there may be cases where the removal of a JP on the making of a bankruptcy order might be appropriate. The clause will ensure that the Lord Chancellor can deal with each case on its merits and remove JPs from office only when it is appropriate. The provisions of this and subsequent clauses reflect the basic tenet and philosophy of the Bill in relation to bankruptcy. We are merely carrying it forward to cover particular situations and, in this case, certain extra protections.

Harry Barnes: After that explanation, it seems an entirely sensible clause. The explanation may be relevant also to later clauses.
 Question put and agreed to. 
 Clause 253 ordered to stand part of the Bill.

Clause 254 - Disqualification from office: Parliament

Amendments made: No. 482, in page 176, line 6, at end insert— 
'(2) In this section ''enactment'' includes a provision made by or under—
(a) an Act of the Scottish Parliament, or
(b) Northern Ireland legislation.'.
 No. 483, in page 177, line 16, at end insert 'or body'. 
 No. 484, in page 177, line 27, after second 'a', insert 'trust'.—[Miss Johnson.] 
 Question proposed, That the clause, as amended, stand part of the Bill.

Harry Barnes: The Under-Secretary's explanation of justices of the peace being able to retain their position when bankrupt seems relevant to this clause, which disqualifies bankrupts as Members of Parliament. Why is someone disqualified for bankruptcy not allowed to stand for Parliament, and why will a Member of Parliament who is declared bankrupt lose his seat? That applies to both Houses—and it will apply to the Lords however people are appointed to that House in the short or the long run.
 It was pointed out that, depending on someone else's judgment, it is still possible to get rid of bankrupt JPs. Something complex might be needed in order to carry that provision forward for those elected or appointed to Parliament. Although bankruptcy disqualifications date back to 12 and have travelled from one bit of legislation to another, scant attention 
 has been paid in Parliament to those provisions. In some cases, no attention has been paid. The Act of 1812 was called An Act to suspend and finally vacate the Seats of Members of the House of Commons, who shall become Bankrupts, and who shall not pay their Debts in full within a limited Time. My researcher in the Library states: 
''I have checked the main series of debates held in Derby Gate but have been unable to trace a debate on this particular Act.''
 It may be that no debate took place on that Act, and legislation has simply moved on and been adopted from that point. 
 The 1812 legislation arose because those who stood for Parliament had to meet a property qualification, which was discriminative in democratic terms. However, disfranchising people due to bankruptcy tied in with the logic of having a property qualification, because bankruptcy removed the qualification. That logical link was technically broken in 1858, when the property qualification was removed, but reality chugged on for some time until the first payment of MPs in 1911 and the two-stage move to universal franchise in 1918 and 1928. 
 To establish that point, I quote from an article published by W. L. Burn in an edition of Parliamentary Affairs from the summer of 1949, entitled ''Property qualifications in the House of Commons.'' A parliamentarian called Locke King introduced the measure in 1858; the year before, on an unsuccessful attempt, he quoted W. L. Burn in arguing that 
''so long as the suffrage was not universal the existence of property qualifications for membership of the House of Commons was unnecessary. Certainly the abolition of those qualifications made little immediate or direct difference in the type and standing of Members elected. The fact was that a property qualification continued to exist in fact though not in law.''
 The qualification existed until those early 20th century developments to which I referred.

Nigel Waterson: I am fascinated, as I am sure that all hon. Members are, by the thorough research that the hon. Gentleman has done. I wonder whether there could be another factor involved, however. I cannot remember at what time in Dickens' lifetime people stopped being imprisoned for debt, which affected Dickens personally as much as it cropped up in his books. Could that have been another factor in why MPs were treated differently?

Harry Barnes: That may be the case, but it does not affect or destroy the logic of my point.
 I do not understand what the case is for disqualification when we get past the early 20th century, given that there will be no inhibition in terms of property rights. In 1835, Sir Robert Peel raised the problem that concerns me when he was debating the Municipal Corporations Act, which extended the bankruptcy disqualification to any mayor, alderman or councillor. During the Committee stage of that Bill, he said: 
''If property was not to be a qualification, why should bankruptcy or insolvency disqualify?''
 That is a key question that needs a response, even if it was not responded to in 1835. However, that was before the change to the property qualification in 1858 and related to local government, where there was a stronger attachment to a fuller franchise. 
 If the argument is that some people are not fit to serve in Parliament because of their manipulations and incompetencies, resulting in bankruptcy, should that argument apply to those who are not held to be culpable for the bankruptcy, as in the case of justices of the peace, where there is an attempt to square the circle?

Mark Field: Likewise, I am fascinated by the research. Before the hon. Gentleman moves on to other concerns in addition to the property qualification, will he say whether he found any evidence that, between 1812 and the end of the 19th century, there were attempts to unseat a Member who did not fulfil the property qualification, although he was not a fully-fledged bankrupt? We can appreciate that bankruptcy would clearly be evidence of failure to meet a property qualification, but was it the property issue alone that was felt to be important, or other aspects of bankruptcy as well?

Harry Barnes: It seems that the property qualification was not rigorously adhered to. Burn claimed:
''It was a matter of common assumption that such men as Pitt, Fox, Burke and Sheridan possessed no qualifications which could bear examination: indeed Fox said quite candidly that the enforcement of the Act 'would exclude talents from obtaining entrance into the House.'''
 The situation began to change a few years later as a result of a particular case in which a Member was removed from the House because of the provision. Presumably, that sent shudders through those Members of the House who might have been in the same position as Fox and others. 
 New clause 9 would make things easier for those on income support or those who have got into difficulties with the Child Support Agency and built up debts, so that they will not have to incur the expense involved in becoming a bankrupt and will not be prevented from doing something that might enable them to handle their matters better in the future. Will people in that category be excluded? Even though people in certain groups in society might find it easier to get selected, I would have thought it desirable and democratic to be open about who can seek to qualify to represent people. The next clause, on appointments to local government, has similar implications.

Nigel Waterson: We are all indebted to the hon. Member for North-East Derbyshire for having done such painstaking research on the matter; I knew that red box that he carries would come in handy one day. I think that he said that the arguments applied equally to justices of the peace, as they used to be called, or to members of local government, although my hon. Friend the Member for Cities of London and Westminster might want to pick up some specific points.
 We have to be careful as Members of Parliament—by definition, we all have an interest in the clause—
 about giving ourselves any greater privilege than exists at the moment. I cannot help the hon. Gentleman to pin down why the law changed at the beginning of the 19th century. There are two, or possibly three, reasons for that. He touched on one; the property requirement. Clearly, nobody took the opportunity, when that requirement went, to change the rule about bankrupts, so perhaps it is not that. It might have been the restrictions placed on bankrupts; there are restrictions under the present system, but also the greater restriction in those days of possible incarceration for debt. That would have hampered the average MP, even in those days, from going about his duties. I like to think that it was the feeling that it would bring the House into disrepute. I shall come back to that. 
 There is a tantalising fourth possibility. I pricked up my ears when the hon. Member for North-East Derbyshire mentioned 1812. If I remember rightly, that was the year in which the only British Prime Minister ever to be assassinated, Spencer Perceval, was shot on his way in to the House of Commons. He was shot by a bankrupt by the name of Bellingham, a direct descendent of whom currently sits in this House for North-West Norfolk. Whether the House took against bankrupts for that reason in 1812, I do not know, but it seems more than a coincidence that that was the year in which they decided that bankrupts should not be able to sit in the House as MPs. 
 Leaving historical speculation to one side, I return to the possibility of its bringing the House into disrepute. We are, in a sense, back to the stigma argument. Under the previous clause, which I did not rise to speak on, the Under-Secretary used the word ''merely''. That put the whole argument into context. Merely because somebody had become bankrupt, it did not mean that they should not sit as a JP. I assume that the Under-Secretary would apply the same argument to Members of Parliament.

Melanie Johnson: With regard to the new arrangements, as distinct from somebody subject to a bankruptcy restrictions order, I made a clear distinction.

Nigel Waterson: Absolutely. I was not going to misrepresent the Under-Secretary. I was coming on to say that. As I understand new section 426A, everything would remain the same as under the current system, but disqualification would apply only to those subject to a BRO. However, people who, to use the Under-Secretary's word, were ''merely'' bankrupt, without the benefit of a BRO, could continue to sit as Members of Parliament. They could even stand for election, although if they stood and were elected under subsection (3), they would be disqualified and their election would be void, as is currently the situation even though there is no distinction between ''mere'' bankruptcy and having a BRO.
 There is an argument to be had, as in so many areas, about whether there should be a different test for Members of Parliament and those who wish to become or to remain Members of Parliament and the rest of society. If we are in the business of removing the stigma from ordinary citizens—I am not suggesting that we are extraordinary, as our 
 proceedings reveal—are we saying that it should no longer apply to Members of Parliament? Or is there a higher test, not one of principle or ethics, in which we simply ask whether people want to have as their Member of Parliament somebody who has managed to become bankrupt, but without a bankruptcy restrictions order?

Tony McWalter: Does the hon. Gentleman not agree that people can end up bankrupt through circumstances outside their control? They may not have been profligate or behaved unwisely, but may have been badly let down by people whom they had every right to trust. They may have become subject to legal proceedings, as has happened in the House, and, through no will or fault of their own, become drawn into a process that results in the haemorrhaging of their resources. I hope that the hon. Gentleman would be rather more sympathetic to such cases.

Nigel Waterson: I do not mean to be unsympathetic, although it may come across that way, because, but for the grace of God, it could happen to any of us. However, I wonder if we should ask a little more than that of people who want to be Members of Parliament.
 The hon. Gentleman is touching upon what, in another context, the Under-Secretary called bad-luck bankrupts. I remind the Committee that the Opposition do not accept that we should use neat little boxes to contain culpable and non-culpable bankrupts; the totally innocent bankrupts, and the rogues, the villains and the reckless, who should be pilloried and subject to the stigma of bankruptcy restrictions orders. As I said before, some people are pathological optimists. Do we really want as our Member of Parliament—or even as our neighbouring Member of Parliament—someone who may be a rogue? We have had our share of those; the name Maxwell, the former Member for Buckingham, comes to mind, as do John Stonehouse and others. It has happened reasonably regularly for 200 years or more, so we are not discussing the subject in a vacuum.

Harry Barnes: The argument is about existing Members being removed because they have brought the House into disrepute, but it is a bit difficult to have a provision that applies only to people who are already Members. The question is about those who wish to become Members, and whether the electorate should have the right, even when they know about a person's bankruptcy and other factors, freely to elect them. We might have to put up with those who could bring the place into disrepute in order to protect the electorate's right to elect someone whom we might judge to be unsuitable.

Nigel Waterson: I am not sure that I wholly follow that intervention. It was way over my head. As the hon. Gentleman pointed out, we are talking people who are already Members, who can be excluded from the House if they become bankrupt, and about those who stand for election and become Members who, it subsequently emerges, are already bankrupt and cannot be allowed to sit, in which case the election would be void. I hope that any remotely competent party would try to ensure that its candidates were checked beforehand, particularly if they thought there was a chance of them winning.
 It occurs to me that there is a third category. Even if someone were discharged from bankruptcy, having satisfied all his creditors, it would be difficult for the fact not to end up in the public domain; it is bound to come out sooner or later. Again, it is one of the judgments that voters have to make about the candidates standing in the election. 
 I return to the central issue. We have a problem with the stigma argument. First, is it Parliament's business to tell people that there should not be a stigma attached to being bankrupt for any reason, except in certain circumstances and if there is a bankruptcy restrictions order? Whatever the arguments in favour of that for the ordinary citizen, should we not apply a slightly stiffer test for Members of Parliament or potential Members? I am slightly troubled by that, because I believe that even if a bankruptcy is wholly innocent—it may be due to optimism, world trends or whatever—for a Member to be bankrupt is a pretty serious business. Whatever the motives or reasons, there are victims. It is not a victimless crime—it is not a crime at all—but it is not victimless because creditors are left behind who will not get their money. 
 If an MP has been judicious enough to run up debts elsewhere than in his constituency, I can understand the argument that has been made, but if he is leaving a lot of his constituents out of pocket, everything becomes very messy. That is why we would be unwise, without proper debate, simply to change the position for Members of Parliament—for ourselves—without due consideration.

Mark Field: I endorse entirely what my hon. Friend the Member for Eastbourne said about not trying to address such things in this Bill. There is a good case to be made for, if not exempting Members of Parliament from bankruptcy rules, not automatically disqualifying them on the basis of bankruptcy. The hon. Member for North-East Derbyshire (Mr. Barnes) went into great detail about that and the hon. Member for Hemel Hempstead (Mr. McWalter) made similar comments. Although the matter should perhaps be discussed in great detail, it would be wholly inappropriate to reach any conclusion in debate of this Bill alone.
 Discretion might be the better part of valour; I am perhaps a more sympathetic soul than my hon. Friend the Member for Eastbourne, who is now absent. Although on many occasions a Member of Parliament would be ill advised to get himself into a position to go bankrupt, there are certain circumstances in which he or she could spiral quickly into enormous financial problems. The hon. Member for Hemel Hempstead brought that up earlier. Although it would not be a Government's first priority to look at that, it would be sensible for Parliament to consider at some point whether MPs who go bankrupt should automatically be disqualified. 
 The hon. Member for North-East Derbyshire offered an important historical analysis. Restrictions 
 may well have been put into place 200 years ago with property aspects and considerations in mind. It might therefore be that that somewhat dated concept should be reconsidered. Equally, however, here and now is not quite the place and time for such a full and important debate.

Tony McWalter: I want to comment briefly on a matter that goes to the heart of the Bill, although it might appear peripheral and tangential. It comes down to whether we agree with the hon. Member for Eastbourne in not making a distinction, among bankrupt people, between those who are malign and those who are benign. It seems clear to me that in some cases the bankruptcy is malign—a person has deliberately run up a series of debts, let lots of people down, cheated, lied and dissimulated their way into a lifestyle way beyond their resources, and made many other people suffer for it.
 I understand that such people are likely to be made subject to a bankruptcy restrictions order, and I think it quite right, because they have failed to co-operate or have evaded their responsibility, to make the judgment that they will have the weight of bankruptcy around their neck for a considerable time and have their behaviour made subject to various kinds of restriction. It is entirely appropriate that we call the people at that end of the spectrum malign bankrupts. 
 There is another set of people, who get into the same financial predicament, but who have fully co-operated, tried their level best to discharge their responsibilities to the victims of their straitened economic circumstances, and done everything that they can to co-operate with the authorities, whether that results in the winding up of their business or in other inconveniences for them. They have tried hard to discharge their responsibilities, and I call them benign—for want of a better word—bankrupts. 
 That distinction is at the core of the Bill. Those in the benign category will not be tarred and feathered in the same way as the other lot. On any spectrum, there will be intermediate and difficult cases. We know those at one end of the spectrum when we meet them, which, luckily, we do so often. We know those at the other end, too. Then there are the difficult cases in the middle—there always are—when the law requires judgments to be made. However it turns out, I hope that my hon. Friend the Under-Secretary will stick to her guns and say that the distinction will be made in all cases and that the clause will remain as drafted. It removes the odium that has always been visited on benign bankrupts, and I welcome the fact that the matter has been thought through in that regard as well as others.

Melanie Johnson: I should put on record my thanks to my hon. Friend the Member for North-East Derbyshire for provoking such an interesting debate and for giving such an interesting set of historical perspectives. The issue is of interest to us because we are Members of Parliament, and of interest to the House and society more generally because it concerns the standing of Members and their credibility as and appropriateness to be MPs.
 We made clear in the White Paper on insolvency our intention to review the mandatory restrictions on bankrupts and cited the restrictions placed on Members of Parliament as examples. They include a restriction on being elected to the House and sitting or voting in either House or in a Committee of either House in the event of becoming subject to section 427 of the Insolvency Act 1986, which provides that a person who becomes bankrupt in England and Wales or Northern Ireland, or has their estate sequestrated in Scotland, is disqualified. A Member of this House could continue to undertake constituency work, but if after six months they remained bankrupt or sequestrated, their seat would be vacated. Those are the current arrangements. 
 We recognise that the arrangements are a matter for Parliament and not for the Government alone. In drawing up the proposals in the Bill, my right hon. Friend the President of the Council consulted the Chairman of the Standards and Privileges Committee.

Nigel Waterson: If the Under-Secretary is conceding—rightly—that this is a matter for the House and not the Government, will the Committee have a free vote on the clause?

Melanie Johnson: It is not for me to comment on voting in Committee. As the hon. Gentleman knows well, my hon. Friend the Member for Dudley, South (Mr. Pearson), who has remained silent, is the person to whom the question might be addressed outside the Committee.
 In his reply to the request from my right hon. Friend the President of the Council, the Chairman of the Standards and Privileges Committee, the right hon. Member for North-West Hampshire (Sir George Young), confirmed that in the context of the Government's objective of reducing the stigma of bankruptcy, it would no longer be appropriate for a Member who becomes bankrupt to be disqualified from sitting or voting, nor would it be fair to their constituents. The Standards and Privileges Committee also felt that when a Member becomes subject to a bankruptcy restrictions order or an interim order, their seat should be vacated along the lines of the points made by my hon. Friends. By the same token, only bankrupts subject to a bankruptcy restrictions order or an interim order should be disqualified from election to the House. 
 As I said when discussing justices of the peace in response to earlier remarks, that picks up on the pattern and philosophy that we are advocating in other areas of the Bill, as argued for by my hon. Friends. The Government are grateful for the Committee's consideration and have accepted its advice, which is reflected in this clause and in clause 256.

Harry Barnes: I accept very much that the provision on bankruptcy restrictions orders goes a long way to meeting the points that I have been making. If they are dealt with in the way that my hon. Friend the Member for Hemel Hempstead has suggested, the provision will go a considerable way towards meeting my concerns. I welcome the fact that the provision is a change from the previous position.

Melanie Johnson: I am grateful for my hon. Friend's remarks and for his support and clarification on how the provision connects with what he feels should be included in the Bill.
 The clause disqualifies peers who are subject to a bankruptcy restrictions or interim order from sitting and voting. Initially, the proposals will apply only to those persons made bankrupt in England and Wales. That is because Scotland and Northern Ireland have their own devolved, individual, insolvency regimes. Until such times as those are amended, Members sequestrated in Scotland or made bankrupt in Northern Ireland will continue to be subject to the current arrangements. However, we have consulted colleagues in the devolved Administrations and, as with the current arrangements, the new provisions will apply in the same way to Westminster and the devolved Assemblies. For example, Members of this House, the Scottish Parliament, the Northern Ireland Assembly or the Welsh Assembly who are made bankrupt in England or Wales will be able to carry on sitting and voting unless a bankruptcy restrictions or interim order is made against them, at which point their seats will become vacant. 
 We also propose that Greater London Assembly Members and the Mayor of London should be treated on an equivalent basis to Members of Parliament and members of local authorities. We intend to use the order-making powers in the Bill to give effect to that intention. 
 We have not sufficiently considered the question raised by my hon. Friend the Member for North-East Derbyshire on whether there is a need for a further, consequential amendment to deal with the election of Members of Parliament. That is not covered in the way that it might be. I advise my hon. Friend that I will consider his particularly useful points and see whether a consequential amendment is necessary. Under proposed new section 426A, only a person subject to a bankruptcy restrictions order will be disqualified from membership of the House of Commons. It is our intention that people subject to a bankruptcy order will be able to stand for election and to sit in the House—but the standing part needs to be considered further.

Mark Field: There are of course already some anomalies as a result of which people are entitled to stand for Parliament even if they are not entitled to take their seat and represent their constituents. Someone between the ages of 18 and 21 can stand for Parliament, but would not be able to take a seat if elected. As the Under-Secretary will recall, when Viscount Stansgate—as he briefly was—stood for the Bristol South-East by-election in 1961, he was re-elected, but his Conservative opponent was declared the winner even though he had come second in the poll.

Melanie Johnson: I am grateful to the hon. Gentleman for that. Obviously, we are specifically considering the context of insolvency and bankruptcy, and it is to that context that we have confined our consideration. I am sure that the Committees of the House take an active
 interest in many of those issues and there are appropriate forums for discussion of other aspects of legislation as it affects the House or other related bodies.
 I agree that we cannot—indeed, should not—tell people that there will be no stigma and cannot legislate to enshrine a stigma. One important thing that we have heard in this afternoon's debate is that whatever happens on the provision concerning bankruptcy and MPs, at the end of the day the electorate will decide, as they always do, whether or not it is appropriate to support someone's candidature and make them a Member of Parliament. Nothing that we do in Committee will interfere with that. The changes that we are making reflect both what the Joint Committee felt was necessary and the new regime. It will not place undue demands on Members of Parliament, but they will not be treated differently from—to use the words of the hon. Member for Eastbourne—any other ordinary member of the public. That is right because we are here as ordinary members of the public representing ordinary members of the public.

Nigel Waterson: We have discussed the whole gamut from bad-luck bankrupts to benign bankrupts, which I hope do not become terms of art in the insolvency practitioners' world. We are a long way away from enterprise. What changing the rules for Members of Parliament has to do with encouraging enterprise and risk taking in this country completely eludes me, but I dare say that one of these days wisdom will descend on me and I will work it out.
 Question put and agreed to. 
 Clause 254, as amended, ordered to stand part of the Bill.

Clause 255 - Disqualification from office: local government

Question proposed, That the clause stand part of the Bill.

Harry Barnes: The same principles apply to clause 255, which concerns councils. There are, however, some extra considerations that need to be taken into account. Councillors, unlike Members of Parliament, are blocked by decisions made in Parliament, which include statutes, regulations following statutes and ministerial circulars. When, for instance, they deal with planning matters, they have to be very careful about how they handle them and ensure that they are not publicly taking sides because they operate in a semi-judicial capacity. They are subject to investigation by the district auditor, and can be surcharged for supporting illegitimate expenditure by their authority. A surcharge can lead to their debarment from a council.
 Earlier, I referred to Clay Cross, where Biwater was situated. As a consequence of the Local Government Act 1972, in the early 1970s, two teams of councillors in Clay Cross were removed from office because of the surcharge provisions. One was removed for refusing to raise rents according to provisions contained in the 1972 Act. It was claimed that what the team was doing 
 was not illegal because a housing commission could have been sent in. In the end, however, it lost out. A number of its members went into bankruptcy in connection with the surcharge. They were excluded from being able to stand for office during the period of the bankruptcy, and were excluded for an extra five years in relation to the surcharge provision. 
 Fresh elections were held in Clay Cross, where 11 seats were elected for the council. Labour, which had had 11 out of 11 in the first team, now took 10 out of the 11 seats. They were in office for only a month or so and then became a parish council under local government reorganisation. The local government legislation had a knock-on effect and it was claimed that the first team had been caught by other measures. 
 In order to get them surcharged, the district auditor dealt with them jointly and severally. The debts were just over £2,000, the amount by which one could be surcharged under the debarment provision. Should there be joint provisions? Some members had to get out of their bankruptcies and serve another five-year period before they could seek to return to local government office. One who did that is now the highly respected leader of North East Derbyshire district council, but he went through a period when his actions made him look as though he were beyond the pale. 
 Are councillors sufficiently safeguarded by the bankruptcy restrictions order procedure? The clause improves their position considerably, but if they are caught up in measures that seem to be outside their control and they become benign bankrupts, will they be catered for? The Clay Cross councillors were clearly political advocates on behalf of their community. They had strong support within the community and there were massive turnouts at the second election, although the community was divided. They did not take all the seats, only 10 out of the 11. 
 The quotation that I gave from Sir Robert Peel related to councils. According to the report of that debate in 1835: 
''Sir Robert Peel thought that if we reposed so much confidence in the electing body as to fix no qualification for a councillor, on the same principle we ought to allow of the election of a person who had been a bankrupt if the electors thought that the individual had acted with integrity.''
 One could say that however they made that judgment, whether it was a matter of integrity or not, that person was the one they wanted to represent them. 
 In view of the rather controlled nature under which councillors already function, and even though there is an extension of the bankruptcy restrictions order that limits the people involved, I wonder whether they are safeguarded enough. What would have been the decision in the Clay Cross case? They may have been quite willing to face the debarment and the five years from the surcharge provision. Although some survived, other local political careers were virtually ruined by that development, despite the support in the community.

Mark Field: Those in local government often feel that they have even greater restrictions placed upon them than Members of this House. Historically that has
 been the case, although perhaps less so with some of the regulations imposed on Members of the House of Commons over the past six or seven years since the Neill committee and various other restrictions.
 We have discussed at some length the relation to the interim order. I appreciate that in the discussions on schedule 20 the Under-Secretary confirmed that such orders would be made only when there is a prima facie case for a fully fledged bankruptcy restrictions order. But what if, after the interim order is made, the BRO does not come to pass? Would a councillor subject to an interim order, perhaps for only a few weeks, then have to resign and a by-election be called? Is there some opportunity by which the interim order can be done away with? 
 Under clause 255, an interim order would be enough for the disqualification to come into effect. Would that disqualification be declared void? What would take effect? In local government, the wheels of bureaucracy might move more quickly than in national Government. There was a high-profile case, in different circumstances, in the Newham constituency during the previous Parliament, where a disqualification order was subsequently declared void by the High Court. It is likely that the process will be accelerated with local government. 
 I should be interested to know whether consideration has been given to when an interim order is not upheld for some reason; whether it is intended that councillors should be disqualified and a by-election held; or whether some time mechanism will be put into place to ensure that the process is not so accelerated that an interim order alone would result in disqualification.

Melanie Johnson: Similar issues were raised on earlier related clauses. This clause enacts a parallel provision for councillors to that we have been discussing for Members of Parliament and Justices of the Peace. It does not necessarily follow that bankruptcy makes individuals unfit to serve as local councillors. There might be circumstances under which they were able to continue. There is the same distinction with those subject to bankruptcy restrictions orders.
 The interim order requires a prima facie case before it is made. I confirm that a councillor subject to an interim BRO would have to resign. That may not be the answer the hon. Gentleman seeks, but there has to be a good prima facie case in the first place for an interim BRO to be issued. The kind of eventuality he contemplates is therefore unlikely to occur. 
 Question put and agreed to. 
 Clause 255 ordered to stand part of the Bill.

Clause 256 - Disqualification from office: general

Amendment made: No. 483, in page 177, line 16, at end insert ''or body''.—[Miss Johnson.]

Nigel Waterson: I beg to move amendment No. 559, in Clause 256, page 177, leave out lines 26 to 28.
 This takes us back to the stigma problem. Looking at this from the other end of the telescope, whatever one's views on it, the Government's policy is to reduce the stigma of bankruptcy. However, Clause 256(8)(c) actually extends the definition of a bankrupt to include those in England and Wales who are subject to IVAs and deeds of arrangements and those in Scotland who are subject to something called trust deeds for creditors. According to PricewaterhouseCoopers, such people have never before been treated as bankrupts for any purpose and have never been subject to any of the restrictions on bankrupts. One of the attractions of a composition of creditors is that they enable the debtor to avoid the stigma and restrictions of bankruptcy, including, for example, any restrictions on exercising their profession. So we take the view that this is a retrograde step and I would like the Minister to justify why there should be this significant change from the current practice.

Melanie Johnson: Amendment No. 559, if passed, would create a harsher regime for those who are not bankrupt than for those who are, so I am not quite clear how that relates to the hon. Gentleman's earlier remarks. Many debtors come to an agreement with their creditors outside of bankruptcy, through composition of debts, through a deed or through a settlement or an arrangement. Those people have tried to face up to their financial position by attempting to discharge their debts and we believe that is a responsible attitude that should be encouraged. The effect of these amendments would be that restrictions could still be lifted and amended for those who are bankrupt, but not for those who are in agreements with creditors outside of the bankruptcy. That seems paradoxical, as it would lead to a harsher regime for those who are not bankrupt than for those who are. I therefore trust that that was merely a probing amendment, that I have now persuaded the hon. Gentleman and that he will withdraw it.

Nigel Waterson: Absolutely. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Amendment made: No. 484 in clause 256, page 177, line 27, after second 'a', insert 'trust'.—[Miss Johnson] 
 Question proposed. That the clause, as amended, stand part of the Bill.

Nigel Waterson: As the excellent explanatory notes make clear, this clause
''will provide a wide order-making power for any Secretary of State or the National Assembly for Wales, to review legislation under his or her policy control and to maintain, repeal, amend or abolish such restrictions on bankrupts as they deem appropriate.''
 It is, on the face of it, an extraordinarily wide provision. 
 I am curious as to what kind of people, situations and officers that we may be referring to here. We have gone to the lengths of having in the Bill clauses dealing with the situation of justices of the peace, Members of Parliament and members of local councils, so what situations do the Government envisage under the clause? It is a very wide provision, it gives tremendous powers, presumably it could impose disqualification 
 where none exists, and also the opposite. With what areas is it designed to deal?

Melanie Johnson: The Bill provides an opportunity to review the relevance of restrictions that appear unnecessary or outdated and there are a great number of other restrictions in both primary and secondary legislation that are automatically imposed on bankrupts by other legislation that might be appropriate for culpable bankrupts, but not in the remaining cases. Examples of restrictions include not being able to be a school governor, a member of a regional flood defence committee or a registrar of births, deaths and marriages. [Laughter.] Well, the hon. Gentleman asked, so I am telling him.
 One area that is greatly affected by the automatic provisions is health. Numerous boards and tribunals that deal with health matters require members who have been made bankrupt to resign. Following an internal review, the Department of Health has confirmed that it intends to remove references to bankrupts in the legislation and replace them with references to bankruptcy restriction orders. 
 A number of the bodies that prohibit a bankrupt's involvement have never met. An example is the arbitration tribunal set up under the Wireless Telegraphy Act 1949—I am trying to vie with my hon. Friend the Member for North-East Derbyshire in going back to previous times. A number of bankrupts serve the local community in one way or another, and requiring them to refrain from such service is often one of the most embarrassing and traumatic effects of bankruptcy. 
 Colleagues in other Departments will review on their merits each of the restrictions for which they have policy responsibility, and appropriate proposals will be made in secondary legislation. That does not mean that all restrictions will be lifted, because they may be appropriate in certain cases. However, I have given a flavour of the wide diversity of cases covered by the clause and the reasons for supporting it.

Nigel Waterson: The Under-Secretary has certainly given us a flavour of those cases, which is helpful. I can imagine that it would be intolerably embarrassing to be asked to resign from a regional flood committee on the basis of one's bankruptcy, so I immediately withdraw all my reservations about the clause.
 Question put and agreed to. 
 Clause 256, as amended, ordered to stand part of the Bill. 
 Clause 257 ordered to stand part of the Bill. 
 Schedule 23 agreed to.

Clause 258 - Fees

Amendment made: No. 564, in page 178, line 28, leave out 'refuse or cancel' and insert 
'disregard an application or withdraw'.—[Miss Johnson.]

Nigel Waterson: I beg to move amendment No. 528, in page 178, line 38, at end insert—
'(5) Where the Secretary of State cancels the recognition of a body because of a failure to pay fees under subsection (1):
(a) any member of that body who, immediately before such cancellation, was authorised to act as an insolvency practitioner by virtue of his membership and was so acting in relation to any other person or persons, shall continue to be authorised to act as an insolvency practitioner in relation to that person or those persons notwithstanding such cancellation, but
(b) if the court is satisfied that such a member is not a fit and proper person to act as an insolvency practitioner it may order that this subsection shall not apply or shall cease to apply to him.'.

Nigel Beard: With this it will be convenient to take new clause 9—Fees: further provision—
'.—The following shall be inserted after section 415(3) of the Insolvency Act 1986 (Fees orders (individual insolvency proceedings in England and Wales)):
''(3A) An order under this section shall provide for:
(a) exemption from any fees payable under this section by applicants who, at the time when a fee would otherwise be payable, are in receipt of income support, income-based jobseekers allowance, working families tax credit or disabled persons tax credit (working tax credit and pension tax credit from April 2003) and any other benefit that the Secretary of State may by order specify;
(b remission of all or part of any fees payable under this section where the Secretary of State considers that the payment of any fees payable under this section would, owing to the exceptional circumstances of the particular case, cause undue financial hardship;
(c) a reduction in the fees payable under this section where:
(i) two or more people living in the same household petition for bankruptcy at the same time, and
(ii) they are jointly and severally liable for at least one debt in both petitions;
(d) payment of any fees payable under this section by instalments''.'.

Nigel Waterson: I hope that the reason for amendment No. 528 is fairly self-evident. It is another one of our amendments inspired by the professions. If a professional body's recognition is cancelled because of a failure to pay fees due to the Secretary of State, all those whom it licensed to act as insolvency practitioners will automatically cease to be licensed. They could therefore lose their livelihoods through no fault of their own. Although that eventuality will not keep all members of the Committee awake at night, it must be addressed.
 As vacation of office is automatic on the loss of an insolvency licence, there is also a theoretical possibility—horror of horrors—that the cancellation of a professional body's recognition could cause several thousand insolvency estates to lose their officeholders overnight. Attempts to resolve the problem could overload both the courts and those hapless remaining insolvency practitioners. With wonderful understatement, the briefing says: 
''This result is presumably unintended.''
 The amendment is designed to avoid it by allowing practitioners licensed by a body that ceases to be recognised because of non-payment of fees to complete their existing cases. Subsection (5)(b) provides protection against unscrupulous practitioners whose conduct would justify the withdrawal of the licences they had been given by the formerly recognised body. I hope that that is reasonably clear. 
 New clause 9 is of more immediate importance to our constituents. It is drafted and thoroughly supported by the National Association of Citizens Advice Bureaux. The wording is fairly clear: the hon. Member for North-East Derbyshire touched on it in an earlier speech. It has three basic aims. One is to remove financial exclusion from bankruptcy for people on means-tested benefits and tax credits by exempting them from paying the court and deposit fees. The second is to help people on low incomes pay court and deposit fees by allowing for remission of all or part of those fees and providing for payment by instalments. The third is to reduce the fees paid by couples when they both meet a petition for bankruptcy at the same time. The citizens advice bureau service reminds us that it has seen a staggering 39 per cent. increase in consumer credit debt problems over the past four years. Last year it reckoned that it advised on debt and equivalent problems totalling £1.2 billion, so it knows what it is talking about. 
 The briefing picks up a point made by the Under-Secretary on Second Reading—that customers can get free advice from the local CAB and that administration orders can be obtained through the county court to deal with multiple debt problems. It states: 
''Whilst these remedies help many people every year, there are also many people for whom bankruptcy is the most effective way of resolving their debt problem and giving them a fresh start.''
 It also makes the point that 
''the county court Administration Order process is not available if they owe more than £5,000 or do not have a debt which is the subject of a county court judgment.''
 It explains why bankruptcy can be suggested as the right option for certain people—mainly those with substantial debts of £10,000 or more when improvement in the near future is unlikely, insufficient surplus income is available to pay off creditors and little or no assets are possessed. In those circumstances, bankruptcy 
''can mean a fresh start and relief from the stress''.
 Let me quote a couple of brief examples. A CAB in east London reported that a client, a local authority tenant who was employed but owed £33,000 in credit debts, was under such stress that she considered committing suicide. She was advised that bankruptcy was the best option as otherwise it would take about 20 years to repay her debts. In the event, the official receiver decided not to make an income payment order and not to sell any of her goods. Things are now looking up for this client. 
 A CAB in Sussex reported that one of its client's debt problem spiralled out of control when she had to give up work due to health problems. A £5,000 loan grew to more than £18,000 because one creditor refused to suspend interest charges. The stress was making her condition worse, so she decided on the advice of the CAB to go bankrupt. 
 Remarkably, it is much more expensive for an individual to go bankrupt in England, Wales and Northern Ireland in comparison with Scotland—£370 as opposed to £58. Since none of the Liberal Democrats is present, including the hon. Member for 
 Orkney and Shetland (Mr. Carmichael), it is impossible to have that verified immediately. As the briefing points out, for a single person in receipt of jobseeker's allowance, the deposit fee represents nearly five weeks' income. The Under-Secretary may be able to tell us more. A recent legal challenge, R v. Lord Chancellor ex parte Lightfoot, was unsuccessful, but the court obviously wanted to do something because it acknowledged that people might have to face 
''a lifetime of unrelieved indebtedness''.
 NACAB makes it clear that many of its clients are forced to borrow money from their friends and family simply to enable them to pay the fees for going bankrupt. I would hope that because the proposal clearly benefits a section of society for whom bankruptcy can be the answer it will command support from all parts of the Committee. The hon. Member for North-East Derbyshire has already put down a marker on it. As with all our amendments, we are not proud. If the Under-Secretary can improve on it and produce the same result, we are happy to proceed on that basis. However, I hope that the new clause will find favour with the Committee and with the Government.

Harry Barnes: Clay Cross is at the forefront of my contributions and our debates and I have received representations from the Clay Cross citizens advice bureau on this matter. As the hon. Member for Eastbourne pointed out, although court fees can be waived for various people, such as those on income support, a problem arises with the deposit that must be placed for the administration of the bankruptcy. The bureau has brought to my attention a particular case involving a couple whose indebtedness is dealt with in both their names, so that the fees are double those for others on deposit. The bureau's letter states:
''We have dealt with the case of a couple with three children living in rented property. They have no assets but owe nearly £35,000 in consumer debts including County Court Judgements. Both the couple are long-term sick and although bankruptcy would not be an easy step, it would go a long way to relieve them of considerable stress.''
 I grant that going bankrupt should not be an easy move, allowing people to opt for it in many circumstances, but when organisations such as citizens advice bureaux judge that it might be an avenue for people in such circumstances to help them to regulate their arrangements in the long run, we should take that seriously. We should consider the problem of the costs involved, with which the amendment attempts to deal. It is a crazy situation if somebody needs to go bankrupt and the judgment is made that they should do so, but they cannot afford to. We should remove the potential for that.

Melanie Johnson: Amendment No. 528 would ensure that insolvency practitioners can continue to act in cases where they have been appointed to act, even where recognition of their authorising body by the Secretary of State is revoked due to non-payment of the fee payable by that body under subsection (1) of the new section 415A. It includes a caveat that where an individual insolvency practitioner is regarded by the court as unfit to act this shall not apply.
 There is specific provision for such situations in present legislation, but this amendment would deal with them differently and in a bureaucratic way. The current situation, set out in section 391 of the Insolvency Act 1986, is that where recognition is revoked by the Secretary of State when a body fails to meet the criteria set out in that section, an order may specify that members of that body are treated as authorised for a specified period after the revocation takes effect. The amendment deals with this differently and in a way that appears to involve the courts in some areas. 
 I am grateful to the hon. Member for Eastbourne for highlighting the issue. It is right that we consider the implications for individual insolvency practitioners where recognition of their professional body is revoked through non-payment of the fee. Therefore, I would like to consider the matter further and, if necessary, table a suitable amendment on Report. In the light of that, I hope that the hon. Member for Eastbourne will withdraw the amendment in due course. 
 The new clause seeks to provide for the exemption or remission of all or part of the fees in cases of hardship, for reduction on joint petitions and for payment of fees by instalments after a bankruptcy order has been made. It would apply to all fees payable to the Secretary of State, not only those on entering bankruptcy. On applying for bankruptcy, a debtor must currently pay £370 to the court. That is made up of a court fee of £120 and a £250 deposit, which is passed to the Insolvency Service and used to defray, in part, the costs of administering the case. 
 I assure my hon. Friend the Member for North-East Derbyshire that there is recognition for hardship cases through special provisions for debtors in receipt of benefits and those who can otherwise show undue hardship. In particular, such debtors can seek a waiver or reduction of the £120 court fee.

Harry Barnes: The problem is that that still leaves the £250, which is not dealt with by the waiver provisions.

Melanie Johnson: I understand that. Clearly, the new clause goes further and reduces or waives all fees in hardship cases, but that is not justified. It would mean that all the costs of case administration would have to be met from other sources. It would not be fair on creditors in other cases to require them to cover those costs, and we do not believe that general taxation should pay for people to enter bankruptcy when they may have taken on debts irresponsibly.
 I would like to stress that the courts have found that a person's entry into bankruptcy is not a right, and should be considered very much a last resort. That relates to R v. Lord Chancellor ex parte Lightfoot, to which the hon. Member for Eastbourne referred. 
 Bankruptcy is not the only method of dealing with debts, but before I move on to the others, I should mention Scotland. The difference between England and Wales and Scotland represents different legal systems, and the fact that the Insolvency Service's administration fees reflect the full cost recovery in 
 England and Wales. That is not the case in Scotland, where there is subsidy by the taxpayer. 
 Many routes other than bankruptcy are available for debtors. Several of them do not require a deposit, which meets my hon. Friend the Member for North-East Derbyshire's point. Individuals with small debts can and do apply to the county court for county court administration orders, which allow a person in financial difficulty to pay off an affordable sum each month. There is no need to make an initial payment to the court, as administration costs will be deducted from payments for the duration of the order. To qualify, the person must have two or more outstanding debts and at least one outstanding High Court or county court judgment, and the total debts must be less than £5,000. About 8,000 such orders are made each year.

Nigel Waterson: I am grateful to the Under-Secretary, who kindly reiterated the two restrictions to which the NACAB briefing referred. Although it is beyond the scope of the Bill, and certainly that of her speech, I wonder whether there is merit in reconsidering the £5,000 limit. As time goes on, it will be less and less useful and assist fewer and fewer people.

Melanie Johnson: I would like to reflect on the hon. Gentleman's point and perhaps return to it on Report.
 The growing numbers of individuals with debt problems seek advice and assistance from organisations in the voluntary sector, such as the Consumer Credit Counselling Service and Paylink. Those organisations will administer debt repayment plans on behalf of debtors at no cost to the debtor. 
 The new clause proposes a reduction in fees for joint bankruptcies, but it is right that individual affairs should be examined independently as they relate to separate legal entities. That not only ensures privacy for each individual, but assists in establishing whether either case warrants further investigation. The court's discretion to waive the court fee will apply to both applicants. Merely because a couple have one or more common debts does not mean that any less resource is necessarily required to deal with their bankruptcies than would be to deal with two completely separate cases. 
 The new clause would apply to more than the court fee on entering bankruptcy, as it would apply to all fees payable to the official receiver or the Secretary of State to cover the cost of administering the bankruptcy. There is already a de facto abatement for the other fees in cases in which there is little, if any, money. Because the fees are paid from the bankrupt's estate, in cases in which there are insufficient assets in the estate any fees beyond the level of the deposit remain unpaid. 
 I am grateful to Opposition Members and to my hon. Friend the Member for North-East Derbyshire for the opportunity to debate the issue and to respond to NACAB's concerns. I hope that I have persuaded the hon. Gentleman to withdraw the amendment.

Nigel Waterson: I am not minded to press the matter to a vote, but we shall want to return to it on Report.
 Although the Under-Secretary has made a couple of interesting suggestions and concessions, and I should like her to look at the administration order limit—that is a way in to dealing with another part of the same problem—it is still a major problem, and a growing one, as has been brought to our attention by NACAB. I hope that the Under-Secretary will come up with something much closer to what is set out in new clause 9 by the time we discuss this on Report. There is plenty of time in which to consider it; it is a campaign that NACAB has run for some time and we shall press it hard on Report unless the Government come up with 
 something a lot better. For now, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 258, as amended, ordered to stand part of the Bill. 
 Clause 259 ordered to stand part of the Bill. 
 Clause 260 ordered to stand part of the Bill. 
 Further consideration adjourned—[Mr. Pearson.] 
 Adjourned accordingly at four minutes to Seven o'clock till Thursday 16 May at half-past Nine o'clock.